TMI Blog2015 (12) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... case of TRF Limited Vs. CIT (2010 (2) TMI 211 - SUPREME COURT ) has held that after the amendment of section 36(1)(vii) of the Act w.e.f. 1st April,1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Both the companies i.e. the assessee as well as Kinetic Motor Co. Ltd. are separate legal entities and the assessee have been able to show that Kinetic Motor Co. Ltd. is a loss making company. Thus, we reject the contention of the ld. DR that the assessee and the debtor company are the part of same group, writing off of bad debts is a colourable device to set off the profits of one group company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed writing off of bad debts of M/s. Kinetic Motor Co. Ltd. amounting to ₹ 1,27,58,427/-. Aggrieved by the assessment order dated 31-12-2012, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order accepted the appeal of the assessee in toto. The Revenue is in appeal before the Tribunal against the findings of the Commissioner of Income Tax (Appeals) in allowing writing off of bad debts. 3. Shri Dheeraj Kumar Jain representing the department submitted that the Commissioner of Income Tax (Appeals) has erred in accepting the claim of the assessee by allowing writing off of bad debts. The bad debts written off are in respect of Kinetic Motor Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver from the said company. The ld. AR placed on record the list of creditors of Kinetic Motor Co. Ltd. with which the said company had made one time settlement. 5. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. The only issue raised in the appeal by the Department is, whether the Commissioner of Income Tax (Appeals) was justified in accepting the claim of assessee in writing off of bad debts in respect of Kinetic Motor Co. Ltd.? The main contention of the Department is that the assessee has written off the debts of Kinetic Motor Co. Ltd. a group concern, to reduce the profits of the assessee company and thereby reducing the tax liability. 6. A perusal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, it was further submitted that, the above % of 57.19% includes secure debts of banks which was required to be given priority and if the debts of banks are excluded then the payment made by KMCL to other vendors is only 41.8%, compared to 46.32% of the appellant and as per the list submitted by the appellant it is seen that KMCL had negotiated settlement with almost all the vendors to whom only 41.88% was paid out of the total debts. This the payment of 46,32% to the appellant cannot be said to be disadvantages to the appellant company and considering the totality of the facts it cannot be said that the appellant company, being associate concern was put at disadvantage compared to other vendors by KMCL in respect of one time settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KCL to total dues 46.32% 46.32% 8. A perusal of the facts clearly shows that Kinetic Motor Co. Ltd. was in financial distress and it could pay only part of its debts. Since, the assessee in its books of account had written off bad debts, the assessee was not required to establish that debts were in fact irrecoverable. The Hon'ble Supreme Court of India in the case of TRF Limited Vs. CIT (supra) has held that after the amendment of section 36(1)(vii) of the Act w.e.f. 1st April,1989 it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. 9. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Government was not in a position to discharge its acknowledged debt. It might be due to certain fund-flow problem and priority between different needs and there is postponement in discharging certain liability by the Government. There was no negation of claim nor has any Government hospital written that they would not pay any of these amounts. In the light of these facts the Hon'ble High Court disallowed the claim of assessee in writing off of bad debts. In the present case the debtor company had entered into one time settlement not only with the assessee company but with various other creditors, including banks. Moreover, it is not a case where the amount is due from Government or any instrumentality of the Government. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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